Construction along with real estate employs over 51 million people which makes it the second largest employment generator in the country, third largest sector to induce economic growth and the third largest sector in terms of FDI flow. In FY-21, the sector activities accounted for 13% share of the total FDI inflows of US$ 81.72 Billion.
By 2030, more than 40% of the population of India is expected to live in urban India (33% today), creating a demand for 25 million additional mid-end and affordable housing. Further, the share of the urban population is expected to be 50% of the total population by 2050. India government is also committed to build modern infrastructure for the 21st century across the country to reduce logistics cost by 5%. To enable this, the government has launched the Gati Shakti Master Plan to integrate different modes of transportation and increase the speed of infrastructure development in India.
As a result, India aims to become the third largest construction and real estate market globally by 2025 and so is expected to reach US$ 1 Trillion by 2030 contributing 13% to India’s GDP.
To facilitate private participation and investment, the government has permitted 100% FDI through the automatic route in construction (development) projects such as development of townships, construction of residential/ commercial premises, construction of roads or bridges, construction of hotels, resorts, construction of hospitals, educational institutions, construction of recreational facilities and construction of city and regional level infrastructure.
India has become the prime destination for logistics service providers from all over the world. The demand for logistics services in India has been largely driven by the remarkable growth of the economy. Growth in the logistic sector is projected at 9-10% in next few years with the CAGR of 7-8%. This growth is expected to gain greater momentum as the Indian economy recovers from the COVID pandemic and starts to grow faster.
However, with infrastructure still under-developed in large parts of the country and incapable of catering to a growing economy, logistics management in India has become too complex. The poor condition of infrastructure directly translates to higher turnover, pushing up the operating costs and reducing efficiency. There are other problems such as complex regulatory compliance and limited adoption and utilization of technology, which has resulted in increased paperwork and inability to communicate effectively with customers.
COVID-19 has revealed the weaknesses and inefficiencies of India’s current logistics system. Only a shift to more formal, technologically capable organizations may allow the sector to meet the challenges yet to come. The pandemic has made agility and technological sophistication a necessity for survival along with building competitive advantage. The formal and larger logistics firms may gravitate toward Digital logistics - artificial intelligence, blockchain, and other technological solutions, to help solve their problems and become better prepared for the future. Estimates indicate that such digital technology could not only reduce logistics costs by as much as 25% but also help companies offer better service and free internal capacity for other purposes.
Hence, the future of the logistics sector depends not only on the continued development of quality infrastructure, but also on the capability of the service providers in adapting themselves and making optimal utilization of technology.
GFST’s Infrastructure, Construction, Real Estate and Logistics Vertical, has set its goal as facilitating emergence of a technologically advanced and operationally efficient infrastructure, construction, real estate and logistics sector in India through policy research and advocacy and in supporting knowledge sharing and partnership building amongst the stakeholders, especially for private sector players and FDI investors.